The U'S' and World Sugar Industries under the EU and DOHA Trade Liberalization

1
The U.S. and World Sugar Industries under the EU
and DOHA Trade Liberalization

• Won W. Koo Chamber of Commerce Distinguished
  Professor and Director Center of Agricultural
  Policy and Trade StudiesNorth Dakota State
  UniversityFargo, North Dakota

2
Presentation Outline

• Characteristics of the U.S. and world sugar
  industries
• Framework for the WTO negotiations
• Sugar policy reform in the EU
• Sugar simulation model
• Simulation results
• Summary and conclusions

3
Characteristics of the World Sugar Industry

• Sugar - produced in over 100 countries
• Total production of sugar - over 133 million tons
  annually for the 1999- 2003 period
• Total volume of sugar traded - about 28 million
  tons for the 1999-2003 period.
• Market - volatile and distorted.

4
(No Transcript)
5
World Sugar Production and Consumption, Raw
Sugar Equivalent, 1970-2004
6
(No Transcript)
7
(No Transcript)
8
Characteristics of the U.S. Sugar Industry

• Worlds fifth largest producer and consumer
• Worlds fourth largest importer
• Produce both beet and cane sugar

9
U.S. sugar industry profiles for 2003/2004
(million short tons, raw value)

• Beet sugar production 4.81 from 26 factories in
  10 states
• Cane sugar production 4.05 from 24 cane mills in
  4 states
• Total production 8.86 from 50 facilities in 14
  states
• Sugar consumption 9.87
• TRQ imports 1.23 from 41 quota-holding
  countries.
• Cane sugar refineries 8 in 6 states.

10
U.S. Production of Beet and Cane Sugar, 1980 to
2004
11
U.S. Sugar Production and Consumption, 1970-2004
12
Market Shares for Sweeteners in the United States
13
Caribbean and U.S. Sugar and HFCS Prices
14
WTO Framework Agreement for Agricultural Goods

• Market Access
• Domestic support
• Export Competition

15
Market Access

• Substantial improvement in market access
• Cut in tariffs and harmonization
• Exception for sensitive products in tariff quota
  expansion and tariff reduction
• Lesser tariff reduction commitments for
  developing countries

16
Domestic Support

• Substantial cut in trade distorting domestic
  support (amber box)
• Harmonization of countries domestic support
  levels
• 20 percent cut on overall support in the first
  year of implementation
• Green box will be reviewed and clarified
• Blue box for U.S. counter-cyclical payments is
  allowed

17
Export Competition

• Export subsidies to be eliminated
• Export credits with repayment periods of more
  than 180 days to be eliminated
• Trade-distorting practices of export STEs to be
  eliminated

18
European Unions Reform in Sugar Policy

• Current policy and trade statistics
• Domestic wholesale price of refined sugar
  (2000-2002 average) 30cents/lbgt world market
  price.
• Import tariff 164
• Production quota 17.4 mmt/year
• Export subsidy 1.3 mmt/year

19
(No Transcript)
20

• Expected reform
• price cut in refined sugar from 632 euros to 421
  euros (758 to 505).
• Reduction in sugarbeet price from 32.8 euros to
  27.4 euros per ton (39.4 to 32.9)
• Quota reduced from 17.4 mmt to 14.6 mmt
• New member countries are compensated as old
  members in terms of sugar support programs

21

• Introduction of decoupled payments to sugar
  farmers in the form of Single Farm Payments (SFP)
  to compensate 60 of lost revenue due to price
  and quota reduction
• ACP and India sugar import remain at 1.3 mmt, but
  price reduced from 421 euros to 329 euros (505
  to 395) per metric ton

22
Model Structure and Development

• Harvested area equation
• Total quantity of sugar production

23

• Per capita sugar consumption
• Total consumption of sugar

24

• Carry-out stocks equation
• Net export equation

25

• A market equilibrium condition
• Price equations

26
EU and DOHA Scenarios

• Limited liberalization in the EU
• Limited liberalization under DOHA proposal in
  selected countries (China, the EU, Japan, and the
  United States)
• 20 cut in tariffs
• 20 increase in import quota

27
(No Transcript)
28
(No Transcript)
29
(No Transcript)
30
(No Transcript)
31
(No Transcript)
32
(No Transcript)
33
Summary and Conclusions

• DOHA negotiations may affect several players in
  the world sugar industry
• Increase in Caribbean price of sugar from 8.4
  cents/lb to 12.1 cents/lb
• Brazil may substantially increase production and
  exports
• Australia, Central America, and Thailand
  increase their exports of sugar moderately
• EU and India increases in imports
• China and Japan substantial increase in imports

34

• EU reform on sugar policy will increase Caribbean
  sugar price, but not affect the U.S. sugar
  industry
• Increase in the Caribbean price of sugar from 8.4
  cents/lb to 9.96 cents/lb
• Reduction in EU sugar production and exports
• Under the current DOHA proposal, U.S. imports of
  sugar would be 1.9 million tons and wholesale
  price would decrease from 24.89 cents to 23.79
  cents
• Brazil may benefit the most under the DOHA
  scenario

35
Thank you!